after enron many companies were forced by increased investor criticism and regulator 691501

After Enron, many companies were forced by increased investor criticism and regulator scrutiny to improve the clarity of their financial disclosures. For example, IBM announced that it would begin providing more detail regarding its “Other gains and losses.” It had previously included these items in its selling, general, and administrative expenses, with little disclosure. Disclosing other gains and losses in a separate line item on the income statement won’t have any effect on bottom line income. However, analysts complained that burying these details in the selling, general, and administrative expense line reduced their ability to fully understand how well IBM was performing. For example, previously, if IBM sold off one of its buildings at a gain, it would include this gain in the selling, general, and administrative expense line item, thus reducing that expense. This made it appear that the company had done a better job of controlling operating expenses than it actually had. Other companies recently announcing changes to increase the in formativeness of their income statements included PepsiCo, Krispy Kreme Doughnuts, and General Electric. Why have investors and analysts demanded more accuracy in isolating “Other gains and losses” from operating items?